1. Christine Eibner RAND Corporation November 18, 2016
Health Reform 2.0: Options for Modifying or Replacing the Affordable Care Act
Christine Eibner
RAND Corporation
November 18, 2016

2. About RAND Non-partisan, non-profit research institution
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Delivery system reform
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3. ACA sought to expand insurance coverage through several mechanisms
Medicaid expansion in participating states
Mandate requiring most people to get insurance
Penalties for large employers that did not offer coverage
Modifications to individual market, which includes “marketplaces”
Insurers cannot deny coverage
Insurers cannot charge older adults more than 3 times as much as younger adults
Can’t upcharge, exclude coverage for pre-existing conditions
Tax credits for low and moderate income individuals without other affordable coverage
Other changes, including allowing young adults to remain on parents’ employer plans

4. Individual market reforms are dependent on other provisions
Guaranteed access to insurance without exclusions, upcharges
Individual Mandate
Premium Tax Credits
Insurance Regulations
Incentivizes young and healthy to enroll
Incentivize young and healthy to enroll
Enable older, sicker to enroll without exclusions, upcharges

5. 20 million became newly insured due to the ACA, with marketplace tax credits accounting for roughly ¼ of gains
HHS/ASPE estimates that 20 million people became newly insured as a result of the law, based on trends in insurance coverage reported in nationally representative surveys. While many surveys, including the American Community Survey, the National Health Interview Survey, and the Current Population Survey, show large declines in the share of the population without insurance between 2012 and 2015, teasing out exactly how people became newly insured is difficult, because most large surveys do not track the same people over time. Frean, Gruber, and Sommers (2016) use an econometric approach to estimate how various factors contributed to changes in the insurance rate between 2012 and 2014, using data from the American Community Survey. They estimate that 26 percent of the reduction in uninsurance was due to marketplace tax credits, 44 percent was due to enrollment in Medicaid, and 30 percent was due to other factors.

6. CBO estimated that repealing the ACA would increase the federal deficit by ~$145 billion between 2017 and 2025
Source: Congressional Budget Office, Budgetary and Economic Effects of Repealing the Affordable Care Act, June Available at:
Source: CBO, June 2015

7. Despite the insurance gains and deficit impact, public is divided on view of the law
Reasons for unfavorable opinion include:
Concerns about cost of coverage
Perception that law gives government too big a role
Source: Kaiser Health Tracking Poll, October 27, 2016

8. Parts of the law enjoy widespread, bipartisan support
Percent with Favorable Opinion of Each Provision
Total
Democrats
Republicans
Extension of employer coverage to dependents <26
80%
87%
76%
Closing the Medicare “donut’ hole
79%
89%
73%
Subsidy Assistance
77%
65%
Eliminate out-of-pocket costs for preventive services
81%
75%
Medicaid Expansion
74%
62%
Guaranteed Issue
70%
69%
Kaiser Health Tracking Poll, March 2014

9. As Congress looks to reform or replace the ACA policymakers may wish to avoid adverse consequences, such as:
Coverage loss among the 20 million people who have gained insurance
Return to an era of pre-existing conditions exclusions and denial of coverage
Deficit increases stemming from repeal of ACA’s revenue-generating provisions
Continued premium increases in the individual market

10. Repeal and replace proposals have some similarities
Trump*
Ryan
Burr, Hatch, Upton
Continuous Coverage Requirement X
Guaranteed Issue ?
Yes**
Premium Regulation
5:1**
Tax Credits
Health Savings Accounts
High Risk Pools
Sales Across State Lines
Medicaid Block Grants
Medicare Reforms
Limits on Employer Exclusion
Transparency
* Trump’s plan is evolving; assessment is based on current website and public statements. Ryan’s plan reflects “A Better Way,” published on 6/22/16; The Burr, Hatch, and Upton plan reflects the “Patient CARE Act,” published on 2/5/16.
** Tied to continuous coverage requirement

11. Repeal and replace proposals have some similarities
Trump*
Ryan
Burr, Hatch, Upton
Continuous Coverage Requirement X
Guaranteed Issue ?
Yes**
Premium Regulation
5:1**
Tax Credits
Health Savings Accounts
High Risk Pools
Sales Across State Lines
Medicaid Block Grants
Medicare Reforms
Limits on Employer Exclusion
Transparency
* Trump’s plan is evolving; assessment is based on current website and public statements. Ryan’s plan reflects “A Better Way,” published on 6/22/16; The Burr, Hatch, and Upton plan reflects the “Patient CARE Act,” published on 2/5/16.
** Tied to continuous coverage requirement

12. COMPARE Model Overview
We used the COMPARE microsimulation model to estimate the effects of health care reforms
Survey Data from Census, AHRQ, Kaiser
Replicate population of US families and businesses
Estimate how families and firms will respond to policy changes
Modify Choices and outcomes based on proposed policy changes
Economic Theory and Past Experience
Policy Proposals under Consideration
COMPARE Model Overview

13. Reforms Under Consideration Generally Reduce Coverage Relative to ACA, but impacts vary
Millions Insured, Alternative Scenarios
Sources: Saltzman, Eibner (2016) and Eibner, Nowak (2016)

14. Reforms reduce spending, but may increase the deficit if revenue-generators are not replaced
Three things: spending, revenue, and deficit impact. Only showing 2 of the three, which is confusing. Add revenue—will make more clear. Get rid of red and blue. Make sure labels wrap around correctly. Label the bars—billions.
Sources: Saltzman, Eibner (2016) and Eibner, Nowak (2016)

15. Subsidies are important to expanding coverage
What could policymakers do to prevent coverage losses and deficit increases?
Subsidies are important to expanding coverage
Carrots (e.g. tax credits) may work better than sticks (e.g. mandate)
Tax exclusions/deductions less-effective than means-tested approaches that are more generous for low-income people
Medicaid expansion accounts for a large share of ACA’s coverage gains
Block grants provide more flexibility to the states and limit federal costs, but impact is uncertain
Find replacements for ACA’s revenue-generators

16. Time may also be ripe to consider “out of the box” alternatives to the ACA
Two ideas that RAND has examined
Eliminate employer tax exclusion, re-direct savings to means-tested subsidies
Provide all Americans with a high-deductible health plan, funded with a per- capita tax
Both would insure more people, at a lower cost, than the ACA
Redirect employer exclusion to
tax subsidies
Give everyone a high-deductible plan
Change in Coverage
+4M
+16M
Change in Deficit
-$14B
-$40B
See Saltzman, Eibner and Enthoven, Health Affairs (2015); Hagopian and Goldman, National Affairs (2012); Liu, Pardee-RAND Dissertation (2016).

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18. Contact Us Christine Eibner Senior Economist Christine_Eibner@rand.org
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Jayme Fuglesten Director, OCR x5363
Kerry Allen
Health Legislative Analyst
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For questions or to connect with RAND research or experts, you can contact Kerry Allen or Jayme Fuglesten in our Office of Congressional Relations